Economics 101: Supply, Demand and Trade-Offs

As the price of benchmark West Texas crude oil topped $70 a barrel for the first time in 10 months, House Speaker Nancy Pelosi (Calif.) yesterday affirmed her support for the tougher fuel-economy standards recently passed by the Senate.

You get what you pay for. When you build lighter cars with more fuel efficiency, you know that ultimately — even with the best (let alone Chinese) technology — safety is compromised. That happened three decades ago when U.S. mileage efficiency rose dramatically in response to the oil shocks of the ’70s. It will probably happen again.

Now we may, as a society, decide that the trade-off is worth it. We may reason that fuel inefficiency leads to dependency on foreign oil which in turn leads us to lives lost in other ways — such as wars to defend our interests in the oil-rich Middle East and elsewhere. But what we cannot deny is that there are trade-offs. What is fundamentally wrong with the energy bill the Senate passed last week and with the debate leading up to it is the chronic, almost pathological, refusal to recognize that there are such trade-offs.